NOSURFACE USE, OIL AND GAS LEASE
THIS AGREEMENT made and entered into this ___ day of ____________ , 2008, between, «LessorFullName» whose address is:
«LessorAddCityStateZip» (hereinafter called “Lessor”, whether one or more) and Llano Royalty, LTD., whose address is 7201 Interstate 40 West,
Suite 321, Amarillo, Texas 79106 (hereinafter called “Lessee”).
1. (a) That Lessor, in consideration of Ten and No/100 Dollars ($10.00) in hand paid, of the royalties herein provided and of the agreements of
Lessee hereinafter contained, hereby grants, leases and lets unto Lessee for the sole purpose of exploring, drilling, operating for, developing and
producing oil, liquid hydrocarbons, gas and their respective constituent products, and for laying pipelines, storing oil, building tanks (but not tank farms),
power stations, roads and other structures thereon necessary to produce, save, care for, treat, process, store and transport said products from the land
leased hereunder, those certain lands situated in «ParcelCounty»County, Texas, and described on Exhibit “A” attached hereto (sometimes referred to
herein as “said lands”) For the purposes of calculating any shut-in royalty payments herein provided for, said lands are estimated to contain
«GrossAcres» acres, whether actually containing more or less.
(b) Lessor expressly excepts from this lease and reserves all minerals of every kind and character in, on and under said lands,
except only the oil and gas herein defined and, in addition, Lessor excepts from this lease and reserves the right to use said lands for the purpose of
investigating, exploring, prospecting, mining for and producing all such minerals, laying pipelines, building roads, tanks and other structures thereon, to
mine, produce, save, take care of, treat, transport and own such other minerals; provided, any such operations by Lessor shall not unreasonably
interfere with Lessee’s operations and use of said lands.
(c) This lease is made subject to any and all easements affecting said lands as reflected in the records of «ParcelCounty» County,
Texas, to which reference is here made.
2. (a) Subject to the other provisions herein contained, this lease shall be for a term of three (3) years from the date hereof (called “primary
term”) and as long thereafter as oil and gas is produced from said lands in paying quantities or this lease is maintained in force by virtue of some other
(b) If, at the expiration of the primary term, neither oil or gas is being produced on said land, but Lessee is then engaged in drilling,
completion or reworking operations thereon, or if, either before or after the expiration of the primary term, production of oil or gas on the leased
premises after once obtained should cease from any cause and this lease is not being maintained in force and effect under some other provision
hereof, this lease as it then exists, shall remain in force so long as reworking, drilling or completion operations on said well are prosecuted with no
cessation of more than ninety (90) consecutive days, and if they result in production of oil or gas, so long thereafter as oil or gas is produced in paying
quantities from said land, or payment of shut-in gas well royalties is made as hereunder provided.
(c) The term “continuous operations” whenever used in this lease shall mean and include operations conducted in good faith for
drilling a well, reworking operations, completion operations and reconditioning, deepening, plugging back, cleaning out, repairing or testing of a well.
For all purposes of this lease, operations shall be deemed to be prosecuted with reasonable diligence when prosecuted without cessation of more than
ninety (90) consecutive days elapsed between the completion of operations at one well or location and the commencement of drilling operations at
another well or location.
3. Lessee shall pay or cause to be paid:
(a) As used herein, the term “oil” shall mean and refer to any hydrocarbons produced from said lands, regardless of gravity, capable of
being produced in liquid form at the well by ordinary production methods including without limitation condensate, distillate and other liquid hydrocarbons
recovered from oil or gas run through a separator or other equipment at the lease. As royalty on any and all oil produced from said lands pursuant to
this lease, Lessee shall pay to Lessor «RoyaltyAmount»% of the gross oil production or the value thereof. The value of oil production shall be based
on the highest posted price, plus premium, if any, offered or paid for oil, condensate, distillate, or other liquid hydrocarbons, respectively, of similar
gravity and type in the general area, or the prevailing market price thereof in the general area, or the proceeds of the sale thereof, whichever is greater.
Unless otherwise approved in writing by Lessor, Lessee shall assure that gas produced from said lands that contains liquid hydrocarbons recoverable in
commercial quantities is run through an adequate oil and gas separator of conventional type or other equipment at least as efficient to the end that all
liquid hydrocarbons recoverable from the gas by such means will be recovered before the gas is sold, used, or processed in a plant, and royalty is paid
(b) As used herein, the term “gas” shall mean and refer to all natural gas produced from said lands (including casinghead
gas) and all of its constituent elements, including but not limited to sulfur contained in the gas, natural gasoline, condensate, distillate, butanes,
propane, and other hydrocarbons condensed, absorbed, or separated out of or from the gas after it leaves the lease, including without limitation
casinghead gas and flared or vented gas. Royalty shall be payable under this Paragraph 3(b) on all hydrocarbons produced from said lands other than
oil. As royalty on any and all gas produced from said lands pursuant to this lease, Lessee shall pay to Lessor:
(1) «RoyaltyAmount»% of the gross production of gas not processed in a plant for the extraction of gasoline,
liquid hydrocarbons or other products or the value thereof. The value of such gas production shall be determined on the basis of the greater of (a) the
market value of the gas; or (b) the total value accruing to the producer from the sale or use of the production, including proceeds and any other thing of
value received by Lessee or the operator.
(2) «RoyaltyAmount»% of the gross production of gas processed in a plant for the extraction of gasoline, liquid
hydrocarbons or other products or the value thereof, such value to be determined on the basis of (a) the highest value reasonably available to Lessee if
Lessee sells and delivers the gas at a point before the inlet to the processing plant to an unaffiliated third party processor; (b) if Lessee owns the
processing plant in which the gas is processed or trades the gas for gas that is processed in a plant owned by Lessee, then the value of the gas shall
be the value, determined as in Paragraph 3(b)(1) above of 100% of the residue gas and 100% of the liquids attributable to the gas produced from said
lands; or (c) if Lessee sells the gas at or beyond the tailgate of the plant, but Lessee does not own the processing plant in which the gas is processed
and does not trade the gas for gas that is processed in a plant owned by Lessee, then the value of the gas shall be the highest value, determined as in
Paragraph 3(b)(1) above, of the fraction of residue gas and liquids attributable to the gas produced from said lands to which Lessee is entitled. For
purposes of this lease, Lessee shall be deemed to own the processing plant if Lessee or Lessee’s affiliate owns a five percent or greater interest in the
plant. An “affiliate” includes, but is not limited to, the parent company or a subsidiary of Lessee, a corporation or other entity having common ownership
with Lessee, a partner or joint venturer of Lessee with respect to the ownership or operation of the processing plant, a corporation or other entity in
which Lessee owns a ten percent or greater interest, or any individual, corporation or other entity that owns a ten percent or greater interest in Lessee.
Lessee shall submit to Lessor a disclosure statement regarding whether the Lessee or an affiliate of Lessee owns the processing plant.
(c) If oil or gas production from said lands is processed in a plant for the extraction of gasoline, liquid hydrocarbons or other
products, the value of the gross production shall for purposes of determining royalty due never be less than if such gas had not been processed.
(d) Subject to the consent in writing of Lessor, Lessee may inject gas into any oil or gas producing formation in said lands
after the liquid hydrocarbons contained in the gas have been removed, and no royalties shall be payable on the gas so injected until such time as the
same may thereafter be produced and sold or used.
(e) Lessee shall use all reasonable means to prevent the underground or above ground waste of oil or gas and to avoid the
physical waste, flaring or venting of gas produced from said lands.
(f) Lessee shall pay or cause to be paid royalties due under this lease without deduction for the cost of producing, gathering, storing,
separating, treating, dehydrating, compressing, transporting, and otherwise making the oil, gas and other products hereunder ready for sale or use;
provided, however, with respect to gas processed for the extraction of gasoline, liquid hydrocarbons or other products in a plant not owned by Lessee
(as described in Paragraph 3(b)(2)), no royalty shall be due on gas volumes used or flared in the plant to the extent such volumes are reasonable and
allocable to the lease. For purposes of determining the royalty due, the gross production shall be valued at the point of sale and delivery from Lessee to
an unaffiliated third party. In the event oil or gas is sold through an unaffiliated third party processor, the market value used in the calculation of the
royalty from such a sale shall be the actual proceeds received by Lessee in connection with the sale, use or other disposition of oil or gas produced or
sold from the leased premises. Lessee shall exercise due diligence and use all reasonable efforts in marketing any and all production from said lands to
obtain the best price reasonably available for the oil and gas.
(g) Lessee shall pay cash royalties based on the value of the gross production from the premises, unless Lessor elects to receive
royalty in kind. Lessee shall pay oil or gas royalty, or both, in kind at the option of Lessor. Lessor may exercise its option to take oil or gas royalty in
kind, or if royalty is taken in kind, Lessor may elect to take cash royalties, at any time or from time to time by giving Lessee notice of such election not
less than sixty (60) days in advance. If Lessor elects to take its royalty production in kind, lessor or its authorized representative may elect to have the
royalty production delivered in kind at the wellhead, at the oil and gas separator, into a pipeline connected at the well, at the location lessee sells its
production, or at another location mutually acceptable to Lessor and Lessee. Lessee shall bear all costs to the point of delivery.
(h) Lessee shall pay to lessor royalty at the applicable royalty rate on any monetary settlement received by Lessee from any
breach of contract by Lessee’s purchaser relating to the marketing, pricing or taking of oil or gas production from the premises.
(i) If at any time, whether before or after the expiration of the primary term, Lessee shall complete a well or wells on said lands
which well or wells are capable of producing gas in commercial quantities but are shut-in resulting in gas not being produced and sold or used, Lessee
may pay as royalty to Lessor for each shut-in well and the acreage ascribed thereto pursuant to the provisions of Paragraph 2 (b), on or before the
expiration of ninety (90) days after (I) the date drilling, completion or reworking operations have ceased, or (ii) the date such gas ceases to be sold or
used, and the well is shut-in as the case may be, an amount equal to Twenty-Five ($25.00) per acre of said lands attributed to the producing unit upon
which the well or wells are located, and upon making said payment, it will be considered that each such well is producing gas in paying quantities within
the meaning of this lease for a period of one (1) year after the expiration of said ninety (90) day period, and the intermittent production of gas from any
well during such year shall not render necessary any new or additional payments of shut-in royalty with respect to such well or the acreage ascribed
thereto, but Lessee shall account to Lessor for the royalty on such gas produced during such year in accordance with the other provisions of Paragraph
3. In like manner and upon like payments being made annually on or before the expiration of the preceding year for which such payment or tender has
been made, it will be considered that said well or wells producing gas in paying quantities for such successive periods of one (1) year each, but this
provision shall not be effective to continue this lease in force and effect as to acreage assigned to a shut-in gas well for a period of more than two (2)
consecutive years after the date of completion or shut-in (or for shorter periods from time-to-time after the date of completion or shut-in which aggregate
five (5) years in all). All shut-in royalty payments under this lease shall be paid or tendered directly to Lessor at the above address. All payments or
tenders shall be made by check and such payments or tenders to Lessor by deposit in the U.S. Mails in a stamped envelope addressed to the Lessor at
the last address known to Lessee shall constitute proper payment. In the event Lessee fails to make any payment as provided herein, the entire lease
is subject to terminate at the option of Lessor, but it shall not be subject to terminate until Lessor has given Lessee notice of the improper payment and
Lessee has not cured such problem within twenty (20) days of receipt of such notice.
(j) Lessee is obligated to Lessor to make and shall be liable for the payment of royalties hereunder irrespective of the failure or
bankruptcy of any third party crude oil or gas purchaser, and irrespective of the execution by Lessor of a division order or any similar agreement in favor
of any such third party purchaser. Accounting and payments to Lessor of royalties from the production of oil and gas from any well shall commence no
later than ninety (90) days after the commencement of production. Thereafter, unless otherwise specifically provided herein, all accounting and
payments for royalties shall be made on or before the 25th day of the second calendar month following the calendar month in which production
occurred. Should Lessee at any time fail to make royalty payments to Lessor on or before the last day of the second calendar month following the
calendar month in which the production occurred, Lessor may, at Lessor’s election, cancel this lease by giving Lessee ten (10) days advanced written
notice of such cancellation. Lessee may avoid such cancellation by paying Lessor all sums owed by Lessee to Lessor prior to the expiration of said ten
(10) day period. Unless otherwise herein expressly provided, and whether or not Lessor shall have canceled this lease for non-payment, any royalties
or other payments provided for in this lease which are suspended and are not paid to Lessor within the time periods specified therefore shall accrue
interest at the highest rate which may be legally contracted for by parties in the position of Lessor and Lessee from the due date until paid, and in
addition to any other remedies available to Lessor at law, Lessor shall have a lien on Lessee’s leasehold estate and all property, including oil or gas
which has been produced but not yet removed from the leased premises. Acceptance by Lessor of royalties which are past due shall not act as a
waiver or estoppel of Lessor’s right to recover any and all interest due thereon under the provisions hereof unless the written acceptance of
acknowledgment by Lessor to Lessee expressly so provides. Any tender or payment to Lessor of a sum less than the total amount due Lessor
hereunder which is made or intended to be made as an offer of settlement or an accord and satisfaction by or on behalf of Lessee must be
accompanied by a Notice of Settlement Offer, so denominated, addresses to Lessor. Any such offer of settlement submitted solely by the tender of a
check containing language of settlement or accord and satisfaction printed or otherwise inserted thereon shall not be deemed to be an offer of
settlement or accord and satisfaction unless accompanied by such Notice of Settlement Offer. Lessee shall pay all reasonable attorney fees incurred
by Lessor in connection with any lawsuit in which Lessor is successful in recovering any royalties or interest or in termination this lease due to Lessee’s
failure to pay royalties within the period set forth herein. Lessee further agrees to be solely responsible for the payment of royalties as provided for
herein. Lessee agrees that it will not allow said royalty payments to be made by joint working interest owners or permitted assigns unless specifically
agreed to by Lessor.
4. Lessee, at its option, is hereby given the right and power to pool or combine the acreage of each of the separate tracts covered by
this lease or any portion thereof as to oil and gas, or either of them, with any other land covered by this lease, and/or with any other land, lease or
leases in the immediate vicinity thereof to the extent hereinafter stipulated, when in Lessee’s judgment it is necessary or advisable to do so in order
properly to explore, or to develop and operate said leased premises in compliance with the spacing rules of the Railroad Commission of Texas, or other
lawful authority, or when to do so would, in the judgment of Lessee, promote the conservation of oil and gas in and under and that may be produced
from said premises. Units pooled for oil hereunder shall not substantially exceed 40 acres in each area, and units pooled for gas hereunder shall not
substantially exceed in area 160 acres each plus a tolerance of ten percent (10%) thereof, provided that should governmental authority having
jurisdiction prescribe or permit the creation of units larger than those specified, for the drilling or operation of a well at a regular location or for obtaining
maximum allowable from any well to be drilled, drilling or already drilled, units thereafter created may conform substantially in size with those prescribed
or permitted by governmental regulations. Lessee under the provisions hereof may pool or combine acreage covered by this lease or any portion
thereof as above provided as to oil in any one or more strata and as to gas in any one or more strata. The units formed by pooling as to any stratum or
strata need not conform in size or area with the unit or units into which the lease is pooled or combined as to any other stratum or strata, and oil units
need not conform as to area with gas units. The pooling in one or more instances shall not exhaust the rights of the Lessee hereunder to pool this
lease or portions thereof into other units. Lessee shall file for record in the appropriate records of the county in which the leased premises are situated
an instrument describing and designating the pooled acreage as a pooled units; and upon such recordation the unit shall be effective as to all parties
hereto, their heirs, successors and assigns, irrespective of whether or not the unit is likewise effective as to all other owners of surface, mineral, royalty,
or other rights in land included in such unit. Lessee may at its election exercise its pooling option before or after commencing operations for or
completing an oil or gas well on the leased premises, and the pooled unit may include, but it is not required to include, land or leases upon which a well
capable or producing oil or gas in paying quantities has theretofore been completed or upon which operations for the drilling of a well for oil or gas have
theretofore been commenced. In the event of operations for drilling on or production of oil or gas from any part of a pooled unit which includes all or a
portion of the land covered by this lease, regardless of whether such operations for drilling on or production was secured before or after the execution of
this instrument or the instrument designating the pooled unit, such operations shall be considered as operations for drilling shall be deemed to have
been commenced on said land within the meaning of paragraph 2 (b) of this lease; and the entire acreage constituting such unit or units, as to oil and
gas, or either of them, as herein provided, shall be treated for all purposes, except the payment of royalties on production from the pooled unit, as if the
same were included in this lease. For the purpose of computing the royalties to which owners of royalties and payments out of production and each of
them shall be entitled on production of oil and gas, or either of them, from the pooled unit, there shall be allocated to the land covered by this lease and
included in said unit (or to each separate tract within the unit if this lease covers separate tracts within the unit) a pro rata portion of the oil and gas, or
either of them produced from the pooled unit after deduction that used for operations on the pooled unit. Such allocation shall be on an acreage basis –
that is to say, there shall be allocated to the acreage covered by this lease and included in the pooled unit (or to each separate tract within the unit if this
lease covers separate tracts within the unit) that pro rata portion of the oil and gas, or either of them, produced from the pooled unit which the number of
surface acres covered by this lease (or in each such separate tract) and included in the pooled unit bears to the total number of acres included in the
pooled unit. Royalties hereunder shall be computed on the portion of such production, whether it be oil and gas, or either of them, so allocated to the
land covered by this lease and included in the pooled unit. Royalties hereunder shall be computed on the portion of such production, whether it be oil
and gas, or either of them, so allocated to the land covered by this lease and included in the unit just as though such production were from such land.
The production from an oil well will be considered as production from the lease or oil pooled unit from which it is producing and not as production from a
gas pooled unit; and production from a gas well will be considered as production from the lease or gas pooled unit from which it is producing and not
from an oil pooled unit. The formation of any unit hereunder shall not have the effect of changing the ownership of any shut-in production royalty which
may become payable under this lease. If this lease now or hereafter covers separate tracts, no pooling or unitization of royalty interest as between any
such separate tracts is intended or shall be implied or result merely from the inclusion of such separate tracts within this lease but Lessee shall
nevertheless have the right to pool as provided above with consequent allocation of production as above provided. As used in this paragraph, the
words “separate tract” mean any tract with royalty ownership differing, now or hereafter, either as to parties or amounts, from that as to any other part of
the leased premises.
5. (a) In the event oil and/or gas is discovered on said lands, Lessee agrees to further develop said lands as would a reasonable and prudent
operator under the same or similar circumstances.
(b) Lessee shall adequately protect the oil and gas under said lands from drainage from adjacent lands or leases, including land
not owned by Lessor and lands owned by Lessor which are leased at a lesser royalty. If oil or gas should be produced in paying quantities from a well
draining said lands, Lessee shall, within ninety (90) days after notice from Lessor of such producing well, begin in good faith and pursue diligently
operations leading to the drilling of an offset well and such offset well shall be drilled to such depth as may be necessary to prevent drainage of said
lands, and Lessee shall use all means necessary in a good faith effort to make such offset well produce oil or gas in paying quantities. Any well located
within six hundred and sixty (660) feet of said lands shall be presumed to be draining the premises. Payment of the bonus, royalties paid or to be paid,
shut-in royalty, or other amounts due hereunder shall not relieve Lessee from its obligations under this Paragraph 4(b); provided, however, that Lessee
shall have the option of paying Lessor, as royalty, a sum equal to the royalties which would be payable under this lease on the production from the well
on adjacent land had it been drilled and produced under this lease, and, as long as Lessee may elect to pay such royalty in lieu of drilling an offset well,
it will be considered that gas is being produced from said lands within the meaning of Paragraph 2 hereof.
6. Subject to the provisions hereinafter contained, the rights of either party hereunder may be assigned in whole or in part, but Lessee
shall not, without the written consent of Lessor, be permitted to (a) sever or separate the oil rights from the gas rights under this lease, or (b) make any
assignment of acreage in tracts of less than one hundred sixty (160) acres each. The provisions hereof shall extend to the heirs, successors and
assigns of the parties hereto, but no change or division in ownership of the land, rentals, or royalties, however accomplished, shall operate to enlarge
the obligations or diminish the rights of the Lessee. If any assignment of this lease is made, the assignee shall, within sixty (60) days after the date of
such assignment, notify Lessor in writing of the name and current address of said assignee, said notice shall also identify the lease and property
involved and the interest so assigned, and no sale or assignment by either Lessor or Lessee shall be binding upon the other party until such party shall
be furnished with a certified copy of the recorded instrument evidencing the same. In the event of assignment of this lease as to a segregated portion
of said lands, the rentals payable hereunder shall be apportionable as between the several leasehold owners ratable according to the surface area of
each and default in rental payment by one shall not affect the rights of other leasehold owners hereunder.
7. When any of the operation contemplated by this lease are delayed or interrupted by operation of force majeure including storm,
flood or other act of God, fire, war, rebellion, insurrection, riot, of as a result of some order, requisition, approval or necessity of any governmental
agency having jurisdiction, the time of such delay or interruption shall not be counted against Lessee. All expressed or implied covenants or conditions
of this lease shall be subject to all valid federal and sate laws, executive orders, rules or regulations of any governmental agency, state or federal,
having jurisdictions, and this lease shall not be terminated in whole or in part, and Lessee shall not be liable in damages for failure to comply therewith,
if compliance is prevented from, by or if such failure is a result of any such law, order, rule or regulation. If from any such cause, Lessee is prevented
from conduction drilling or re-working operations or producing oil and/or gas from said lands, the time during which Lessee is so prevented shall not be
counted against Lessee, and this lease shall be extended for a period of time equal to that during which Lessee is so prevented from conducting such
operations. It is provided, however, that no such law, rule, order or regulation shall eliminate the necessity for, nor extend the time within which rentals,
royalties and other payments provided for herein are to be paid. Before the provisions of this Paragraph may be relied upon, Lessee must furnish
written notice to Lessor, within a reasonable time after the first day of the provisions hereof are relied upon, of such event, giving the beginning date
thereof; and, within a reasonable time after such event ceases, notify Lessor of the resumption of activities, and Lessee shall be obligated to seek
exceptions from any order, rule, regulation of governmental authority if the facts would raise grounds for seeking exceptions.
8. Each individual Lessor executing this lease hereby warrants and agrees to defend the title to his or her respective undivided interest
to the oil and gas in and under said lands, but each Lessor who executes this lease in a fiduciary capacity does not bind himself, herself or itself
individually to a warranty of title to the undivided interest if his, her or its principal and join in this covenant of warranty insofar and only insofar as his,
her or its respective fiduciary capacity has the power and authority to do so for the undivided interest in oil and gas represented, but no further. If
Lessor’s interest in the minerals covered by this lease in, on and under said lands is less than the undivided fee interest to the entirety thereof, then
Lessor agrees that the royalties provided for in this lease shall be paid to Lessor in the proportion which Lessor’s interest bears to the entire and
undivided fee estate therein. With the exception of any existing installment federal estate tax liens, Lessee at its option, may discharge any tax lien
upon Lessor’s interest in the land covered by this lease (unless such tax lien is being contested in good faith by Lessor by appropriate proceedings
instituted for such purpose) and, in that event, Lessee shall have the right to apply royalties hereunder to reimburse such payment.
9. It is agreed that neither this lease nor any terms or provisions hereof shall be altered, amended, extended or ratified by any division
order or transfer order executed by Lessor, its successors, agents or assigns, but that any division orders or transfer orders shall be solely for the
purpose of confirming the extent of Lessor’s interest in production of oil and gas from said lands. Any amendment, alteration, extension or ratification of
this lease or of any term or provision thereof shall be made by an instrument in writing clearly denominated as to its purpose and effect, describing the
specific terms or provisions of the lease affected and the proposed change or modification thereof, and executed by the party against whom any such
amendment, alteration, extension or ratification is sought to be enforced, and any purported amendment, alteration, extension or ratification not so
drafted and executed shall be of no force or effect.
10. Any notice or other communication permitted or required under the terms hereof shall be in writing and, unless otherwise specified,
be deemed properly given on the date personally delivered, or on the date postmarked, if mailed, postage prepaid United States Mail, addressed to
Lessor or Lessee at the address set forth at the commencement of this lease, or to other such address as may hereafter be des ignated by either party
to the other by notice. Notice given in other manner shall be effective only if and when received.
11. No Surface Use: Grantee waives any and all rights whatsoever of access to or upon the surface of the premises for the
exploration, development, production or transportation of the oil or gas there under. However, this waiver of surface rights shall not be construed as the
waiver of the right of Grantee to exploit, explore for, develop or produce such oil or gas with wells drilled on adjacent lands, including, but not limited to,
directional or horizontal wells bottomed beneath or drilled through any part of the leased premises other than the surface.
12. Lessee agrees and obligates itself to conduct its operations upon said lands in compliance with all federal, state and local laws and
in such a way as to cause a minimum of damage to said lands and improvements thereon. In the event that there is no local law or ordinance
regulating the drilling of oil and/or gas wells on said lands, Lessee agrees and obligates itself to conduct its operations in compliance with the standard
for High Impact Gas Wells under Article II of Chapter 15 of the Municipal Code of the City of Keller, Texas (relating to Gas Drilling and Production),
which code provisions are referred to and incorporated into this lease for all purposes. Notwithstanding the foregoing, Lessee agrees that within one
hundred twenty (120) days after any operation hereunder, weather permitting, Lessee shall repair the damaged land to the fullest practical extent,
including the filling and leveling of all holes, pits, ruts, roads or excavations in the areas no longer to be used by Lessee; and upon termination hereof,
to fully repair all damaged land not already repaired to the end that the land will be rendered to substantially the same condition as it was prior to
commencement of such operations. Lessee shall pay for all actual injury or damage done or caused by Lessee in its operations hereunder to any
buildings, fences, roads, roadway easements, culverts, merchantable timber, growing crops (including indigenous grasses and trees) or other
improvements on said land or to livestock on said land which is not replaced or repaired by Lessee according to the terms of this lease.
13. Lessee shall not use surface water from watercourses, rivers, lakes, streams, ponds and other impoundments on said lands or
groundwater from any existing water well located on said lands for any purpose without Lessor’s consent. Lessee may drill a water well on said lands
and use the groundwater from the water well for primary production operations for each oil or gas well the surface location of which is located on said
lands. In the event Lessee drills a water well on said lands, when Lessee's need for it has ceased, upon Lessor's written request, said water well and
all pipe, casing and connections will be assigned to Lessor. Lessee shall not use groundwater from said lands for primary production operations in
connection with any well located off of said lands. Lessee shall not use groundwater from said land for secondary and/or enhanced recovery operations
in connection with any well whether located on or off of said lands without the written consent of and appropriate compensation to Lessor.
14. Lessee shall not use wells on said lands for disposal of salt water produced off of said lands without the written consent of and
appropriate compensation to Lessor.
15. It is understood and agreed that one (1) year following the expiration of the primary term of this lease (or upon the expiration of any
extension or renewal of the primary term), whichever occurs last, Lessee shall release said lands as to all rights lying below one hundred (100) feet
below either (1) the deepest depth drilled in any well drilled on said lands; or (2) the stratigraphic equivalent of the base of the deepest formation
producing or capable of producing in any well drilled on the said lands, whichever is the deepest, provided however, if Lessee is then engaged in
operations on said lands, this lease shall remain in full force and effect as to all depths so long as no more than ninety (90) days elapse between
16. Lessee hereby releases and discharges Lessor, its directors, officers, employees, partners, agents, contractors, subcontractors, guests,
invitees, and their respective successors and assigns, of and from all and any actions and causes of action of every nature, or other harm, including
environmental harm, for which recovery of damages is sought, including, but not limited to, all losses and expenses which are caused by the activities
of Lessee, its directors, officers, employees, partners, agents, contractors, subcontractors, guests, invitees, and their respective successors and
assigns, arising out of, incidental to, or resulting from, the operations of or for Lessee on said lands hereunder (or lands pooled therewith), or that may
arise out of or be occasioned by Lessee’s breach of any of the terms or provisions of this lease, or by any other negligent or strictly liable act or
omission of Lessee. Further, Lessee hereby agrees to be liable for, exonerate, indemnify, defend and hold harmless Lessor, its directors, officers,
employees, partners, agents, contractors, subcontractors, guests, invitees, and their respective successors and assigns, against any and all claims,
liabilities, losses, damages, actions, personal injury (including death), costs and expenses, or other harm for which recovery of damages is sought,
under any theory including tort, contract, or strict liability, including attorneys’ fees and other legal expenses, including those related to environmental
hazards, on the leased premises or lands pooled therewith or in any way related to Lessee’s failure to comply with any and all environmental laws;
those arising from or in any way related to Lessee’s operations or any other of Lessee’s activities on said lands (and lands pooled therewith); those
arising from Lessee’s use of the surface of said lands; and those that may arise out of or be occasioned by Lessee’s breach of any of the terms or
provisions of this lease or any other act or omission of Lessee, its directors, officers, employees, partners, agents, contractors, subcontractors, guests,
invitees, and their respective successors and assigns. Each assignee of this lease, or an interest therein, agrees to be liable for, exonerate, indemnify,
defend and hold harmless Lessor, its directors, officers, employees, partners, agents, contractors, subcontractors, guests, invitees, and their respective
successors and assigns, in the same manner provided above in connection with the activities of Lessee, its officers, employees, and agents as
described above. EXCEPT AS OTHERWISE EXPRESSLY LIMITED HEREIN, ALL OF THE INDEMNITY OBLIGATIONS AND\OR LIABILITIES
ASSUMED UNDER THE TERMS OF THIS LEASE SHALL BE WITHOUT LIMITS AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF
(EXCLUDING PRE-EXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY PARTY OR PARTIES (INCLUDING THE
NEGLIGENCE OF THE INDEMNIFIED PARTY), WHETHER SUCH NEGLIGENCE BE SOLE, JOINT, CONCURRENT, ACTIVE, OR PASSIVE.
17. Lessee shall use the highest degree of care and all reasonable safeguards to prevent contamination or pollution of any
environmental medium, including soil, surface waters, groundwater, sediments, and surface or subsurface strata, ambient air or any other
environmental medium in, on, or under, said lands, by any waste, pollutant, or contaminant. Lessee shall not bring or permit to remain on said lands
any asbestos containing materials, explosives, toxic materials, or substances regulated as hazardous wastes, hazardous materials, hazardous
substances (as the term “Hazardous Substance” is defined in the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
42 U.S.C. Sections 9601, et seq.), or toxic substances under any federal, state, or local law or regulation (“Hazardous Materials”), except ordinary
products commonly used in connection with oil and gas exploration and development operations and stored in the usual manner and quantities.
LESSEE’S VIOLATION OF THE FOREGOING PROHIBITION SHALL CONSTITUTE A MATERIAL BREACH AND DEFAULT HEREUNDER AND
LESSEE SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND LESSOR, ITS AGENTS, EMPLOYEES, TENANTS, GUESTS, INVITEES, AND
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY CLAIMS, DAMAGES, JUDGMENTS, PENALTIES, LIABILITIES,
AND COSTS (INCLUDING REASONABLE ATTORNEYS’ FEES AND COURT COSTS) CAUSED BY OR ARISING OUT OF (1) A VIOLATION OF THE
FOREGOING PROHIBITION OR (2) THE PRESENCE, RELEASE, OR DISPOSAL OF ANY HAZARDOUS MATERIALS ON, UNDER, OR ABOUT
SAID LANDS DURING LESSEE’S OCCUPANCY OR CONTROL OF SAID LANDS. LESSEE SHALL CLEAN UP, REMOVE, REMEDY AND REPAIR
ANY SOIL OR GROUND WATER CONTAMINATION AND DAMAGE CAUSED BY THE PRESENCE OR RELEASE OF ANY HAZARDOUS
MATERIALS IN, ON, UNDER, OR ABOUT SAID LANDS DURING LESSEE’S OCCUPANCY OF SAID LANDS IN CONFORMANCE WITH THE
REQUIREMENTS OF APPLICABLE LAW. THIS INDEMNIFICATION AND ASSUMPTION SHALL APPLY, BUT IS NOT LIMITED TO, LIABILITY FOR
RESPONSE ACTIONS UNDERTAKEN PURSUANT TO CERCLA OR ANY OTHER ENVIRONMENTAL LAW OR REGULATION. LESSEE SHALL
IMMEDIATELY GIVE LESSOR WRITTEN NOTICE OF ANY BREACH OR SUSPECTED BREACH OF THIS PARAGRAPH, UPON LEARNING OF
THE PRESENCE OF ANY HAZARDOUS MATERIALS, OR UPON RECEIVING A NOTICE FROM ANY GOVERNMENTAL AGENCY PERTAINING TO
HAZARDOUS MATERIALS WHICH MAY AFFECT SAID LANDS. THE OBLIGATIONS OF LESSEE HEREUNDER SHALL SURVIVE THE
EXPIRATION OR EARLIER TERMINATION, FOR ANY REASON, OF THIS LEASE.
18. It is agreed and understood that a Memorandum of Oil and Gas Lease will be filed of record for the purpose of providing record
notice of the existence of this Lease in lieu of recording the executed original. Said Memorandum of Oil and Gas Lease shall be recorded in the Official
Public Records of Dallas County, Texas, within a reasonable period of time by Lessee and a copy thereof will be furnished to Lessor.
19. This instrument may be executed in multiple counterparts which shall be construed together as a single instrument as though all
parties had signed one instrument and, when executed, each counterpart shall be binding upon and inure to the benefit of each of the parties executing
the same, their respective, heirs, successors and assigns.
THIS AGREEMENT made and entered into this ___ day of________, 2008, between,_____________________ whose address is:
_________________________(hereinafter called “Lessor”, whether one or more) and Llano Royalty, LTD., whose address is 7201 Interstate 40
West, Suite 321, Amarillo, Texas 79106 (hereinafter called “Lessee”).IN WITNESS WHEREOF, this instrument is executed as of the day and year first
LESSOR: ________________________________ LESSOR: ________________________________
SIGNATURE: ____________________________ SIGNATURE: _____________________________
NAME: __________________________________ NAME: __________________________________
TITLE: __________________________________ TITLE: __________________________________
STATE OF TEXAS }
COUNTY OF ______________ }
This instrument was acknowledged before me on this ____ day of _______________,
2008, by __________________________.
Notary Public in and for the State of ___________
STATE OF TEXAS }
COUNTY OF ______________ }
This instrument was acknowledged before me on this ____ day of _______________,
2008, by __________________________.
Notary Public in and for the State of ___________
ATTACHED TO AND MADE A PART OF THAT CERTAIN OIL & GAS LEASE BY AND BETWEEN «LessorFullName», AS LESSOR AND Llano
Royalty, Ltd., AS LESSEE